Nigeria: Fertilizer and gas sectors offer a silver lining amidst food security concerns
Wheat is the third most consumed grain in Nigeria, with local production making up barely 1% of the 5 to 6 million metric tons of wheat used yearly. Nigeria’ s opportune investments in the fertilizer business set it as a credible alternative and regional fertilizer powerhouse. Europe’ s search for alternate energy markets and a reduction in its reliance on…
Food price inflation threatens to leave many individuals in a deteriorating food insecure position since over half of the foods consumed by Nigerian families come from purchases.
• Wheat is the third most consumed grain in Nigeria, with local production making up barely 1% of the 5 to 6 million metric tons of wheat used yearly.
• Nigeria’s opportune investments in the fertilizer business set it as a credible alternative and regional fertilizer powerhouse.
•Europe’s search for alternate energy markets and a reduction in its reliance on Russian oil and gas creates an opportunity for Nigeria.
The recent spike in global market prices for essential food commodities is almost identical to the 2008 food crisis, posing a global danger to food security. The situation is exceedingly terrible in Africa, where the COVID-19 epidemic and, more recently, the Russia-Ukraine conflict have shown the susceptibility of food systems to big shocks, particularly in countries like Nigeria, which depend heavily on imports of critical staple crops like rice and wheat.
Read: China to invest $620 million in Uganda’s largest mining project
Nigeria confronts various dangers to its already tenuous food security as global food prices rise and the supply of wheat, oils, and other products are interrupted due to the Russia-Ukraine conflict. Food price inflation threatens to leave many individuals in a deteriorating food insecure position since over half of the foods consumed by Nigerian families come from purchases.
In particular, Nigeria’s reliance on wheat imports may result in high pricing and supply issues. In addition, Nigeria’s capacity to generate other essential products, particularly fertilizer and natural gas, may enable it to capitalize on global market disruptions caused by the crisis.
Nigeria is especially susceptible to the ongoing global food price spike. Nigeria is Africa’s most populous nation and greatest economy, with a population of about 217 million people. However, like most African nations south of the Sahara, Nigeria has high rates of poverty. Whereas 42.6 per cent of the population lives below the poverty line, 33 per cent of the workforce is unemployed. The population suffers double challenges of food shortages and acute malnutrition. Moreover, 35 per cent of children younger than five are stunted, per the Nigeria Demographic and Health Survey.
Based on the 2022 Global Report on Food Crises, Nigeria ranks among the ten nations with the most significant number of people in food crisis. Notably, COVID-19-induced shocks have aggravated Nigerian families’ susceptibility and food insecurity.
Nigeria imports and consumes a lot of wheat-based goods. The Central Bank of Nigeria (CBN) reports that, after maize and rice, wheat is the third most consumed grain in Nigeria. However, local production makes up barely 1% of the 5 to 6 million metric tons of wheat used yearly.
Nigeria emerged as the world’s fourth-largest wheat importer in 2020, after Egypt, China, and Turkey. With a value of about $2.15 billion, this commodity was Nigeria’s second-largest import after oil products (petrol and diesel). Wheat was also the country’s biggest food import. In 2020, Russia ($401 million) was the second-largest supplier of wheat imports behind the United States ($518 million).
Due to underlying issues, including poor adoption of agricultural technology, limited success in agricultural research and development, disruptions like wars and conflicts, and climate-driven crises, Nigeria’s dependence on imports might not decrease soon.
Thus, even before the COVID-19 epidemic and the most recent Russia-Ukraine crisis, the nation’s food security was susceptible to fluctuations in the price of food on a worldwide scale. Nigeria’s continuous dependence on banning and restricting imports to promote domestic food production underlies this vulnerability. This strategy often produces higher costs for both imported and native food products.
Regarding wheat output, Russia is the world’s third-largest producer, with Ukraine ranking ninth. [Photo/see.news]Rising costs have remained a critical issue in the aftermath of the outbreak. Data from the World Bank/NBS Nigeria – COVID-19 National Longitudinal Phone Survey 2020 reveals that food prices rose rapidly following the pandemic. In March and April, basic food commodity prices increased by 17.2 per cent and 18.37 per cent, respectively. According to the National Bureau of Statistics (NBS), the rise remains the highest in two years.
Recent findings based on comprehensive and long-term monthly food price data have revealed considerable price rises for all chosen food categories during the pandemic. Imported rice and wheat costs, for example, have climbed by 41% and 21%, respectively.
Wheat prices surged by 21% nationally, with considerable increases in price dispersion across markets when the epidemic began, and prices continue to grow.
Wheat is the main component of bread and other products such as noodles, pasta, semolina, and other Nigerian pantry staples. The consumption of these items is higher in cities due to easier market access than in rural regions. Nevertheless, bread remains a major staple throughout the country.
Wheat flour costs, largely constant until 2019, jumped by roughly 3% as the COVID-19 pandemic hit and then by 28% in 2020. Domestic wheat flour costs have risen steadily since. Sliced and unsliced bread has followed a similar pattern; prices were stable before the COVID-19 epidemic but have since risen.
War-related global market interruptions and increased costs would result in product shortages and even higher domestic pricing in Nigeria. Consumers might change their eating habits and switch to cheaper alternatives such as cassava products. Producers may compromise product quality by combining wheat flour with other options such as sorghum and maize flour to keep costs consistent and remain competitive. This will impact food quality and safety, with potentially detrimental nutritional consequences.
In attempts to lessen its reliance on wheat imports, the government may be time to rethink President Olusegun Obasanjo’s 2002 “cassava inclusion” strategy. The strategy recommended replacing at least 10% high-quality cassava flour for wheat in bread and confectionary production.
The policy previously failed due to the disobedience of flour millers and other issues. However, a modified version might operate under current conditions.
Nigeria urgently needs to reduce its reliance on wheat. As a result, it may reconsider temporarily lifting the 15% levy on wheat imports imposed in 2012 to increase local cassava production. The government should try substituting cassava flour for wheat flour in bakery products and boost local wheat production.
Nigeria’s opportune investments in the fertilizer business set it as a credible alternative and regional fertilizer powerhouse. [Photo/guardian]While the food security crisis escalates, the situation may provide prospects for Nigeria’s fertilizer business. Nigeria’s annual domestic fertilizer requirement is around 700,000 metric tons of nutrients (FAOSTAT); in 2019, the country produced 1 million metric tons per year (2019) with 61 fertilizer manufacturing and blending units.
That scenario might change with the March 2022 opening of the Dangote Fertilizer Plant. The plant will produce 3 million metric tons of granulated urea per year. Nigeria is presently the continent’s biggest producer of fertilizer. President Muhammadu Buhari declared during the plant’s inaugural ceremony that Nigeria would begin exporting fertilizer.
Russia is among the world’s top fertilizer suppliers. With the global markets disrupted by conflict and sanctions, importing countries are exploring new supplies. Nigeria’s opportune investments in the fertilizer business set it as a credible alternative and regional fertilizer powerhouse. The development may mitigate some of the crisis’s adverse effects on fertilizer-importing nations, notably those in West Africa.
Read: Investment opportunities for Africa to feed the world
Europe’s search for alternate energy markets and a reduction in its reliance on Russian oil and gas creates an opportunity for Nigeria. According to the African Energy Chamber Outlook Report, Nigeria’s gas output will rise from 1,450 billion cubic feet (bcf) in 2021 to 1,780 bcf in 2022. The rise would boost internal energy security and allow for more significant exports to Europe and other markets.
Nigeria also supplies liquefied natural gas (LNG) to several European countries. Now, it aims to build the Trans-Saharan Gas Pipeline with partners Niger and Algeria. The pipeline would carry LNG from Nigeria to European markets, allowing Nigeria to expand exports and diversify its natural gas suppliers.
Nigerian export revenue heavily relies on crude oil (nearly 90% of total exports). With the country’s international debt service payments increasing over time, future investments in the natural gas industry will be contingent on the country’s prudent fiscal and debt management policies. This case is by no means guaranteed, given experience, but still possible. Nigeria’s debt-to-GDP ratio, approximately 32% in March 2022, is within a manageable debt servicing range. It is also relatively low compared to other West African countries. Thus, it remains to be seen if the possibilities amid the Russia-Ukraine conflict would eventually strengthen Nigeria’s position as a key gas supplier to global markets.
Given the rapidly unfolding challenges of the Ukraine-Russia crisis, many Nigerians may face increased food insecurity in the coming months. The government has not improved safety net support in response to the Ukraine crisis. However, one potential assistance source going forward is Nigeria’s Food Security Cluster (FSC) program. A broad partnership of international organizations forms the program.
During the pandemic, the FSC assisted qualifying Nigerians in various forms. The aid included cash, mobile money transfers, and paper and electronic vouchers. In December 2020, the FSC helped over 4 million people.
Expanding natural gas production could also provide an opportunity to develop social safety nets. The government could establish a “Natural Gas Fund” from the export revenue to back programs to cushion vulnerable citizens amid critical economic shocks.
Nigeria must also address its dependence on food imports and other structural problems. The nation must build long-term resilience to food crises and other shocks. Similar approaches have succeeded in other countries such as Ghana. Ghana Petroleum Funds channel some excess petroleum revenue to “serving as an endowment to support future development.”
Read: Strengthen fertilizer value chains- African Development Bank
The post Nigeria: Fertilizer and gas sectors offer a silver lining amidst food security concerns appeared first on The Exchange.
ANA NEWS WIRE Disclaimer:
The African News Agency (ANA) is a news wire service and therefore subscribes to the highest standards of journalism as it relates to accuracy, fairness and impartiality.
ANA strives to provide accurate, well sourced and reliable information across Text, Images and Video. Where errors do appear, ANA will seek to correct these timeously and transparently.
The ANA platform also contains news and information from third party sources. ANA has sought to procure reliable content from trusted news sources but cannot be held responsible for the accuracy and opinions provided by such sources on the ANA platform or linked sites.
The content provided for on the ANA News Wire platform, both through the ANA news operation and via its third party sources, are for the sole use of authorised subscribers and partners. Unauthorised access to and usage of ANA content will be subject to legal steps. ANA reserves its rights in this regard.
ANA makes every effort to ensure that the website is up and running smoothly at all times, however ANA does not take responsibility for, and will not be held liable for times when the website is temporarily unavailable due to technical issues that are beyond our control.